Profitability of Technical Analysis: Back-test from 1994 to 2014: S&P 500,FTSE 100 and Russell 2000

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dc.contributor Aalto-yliopisto fi
dc.contributor Aalto University en Pomell, Ville 2015-11-04T13:21:06Z 2015-11-04T13:21:06Z 2015
dc.description.abstract OBJECTIVES OF THE STUDY: This study focuses on profitability of technical analysis by comparing profits acquired with portfolio traded by several technical signals to classical buy-and-hold strategy. Technical analysis tools used in this thesis are Simple Moving Averages (SMAs), Relative Strength Index (RSI), Parabolic SAR (PSAR), Force Index (FI) and Average True Range (ATR). SMA and PSAR can be categorized as trend indicators while RSI is a momentum indicator, FI is a pure volume indicator and ATR is a volatility indicator. The main research objective is to examine whether or not technical analysis can provide excess returns to portfolio over the buy-and-hold strategy. DATA AND METHODOLOGY: This study is based on international stock market data. The indices under consideration are S&P 500 Index, FTSE 100 Index and Russell 2000 Index. The data contains daily trading volumes, opening and closing prices as well as daily highs and lows during the period of January 1, 1994 - December 31, 2014. The methodology of this thesis was to calculate the overall return for traded portfolios under several time periods and compare the obtained returns with the buy-and-hold strategy's returns under the same period. Also, the mean returns for each strategy and time period is under consideration to test the significance of the strategies' returns. FINDINGS OF THE STUDY: The empirical results of the study provide strong evidence that the markets considered in this study are efficient and we have no reasons to reject efficient market hypothesis. The technical trading beat the buy-and-hold strategy in 35 times out of a total of 450 observations but these results were insignificant on any reasonable significance level. Based on the empirical results it can be also stated with high confidence that the technical analysis is not able to provide excess returns compared to the simple buy-and-hold strategy. en
dc.format.extent 52
dc.language.iso en en
dc.title Profitability of Technical Analysis: Back-test from 1994 to 2014: S&P 500,FTSE 100 and Russell 2000 en
dc.type G2 Pro gradu, diplomityö fi Kauppakorkeakoulu fi School of Business en
dc.contributor.department Taloustieteen laitos fi
dc.contributor.department Department of Economics en
dc.subject.keyword technical analysis
dc.subject.keyword Moving Average
dc.subject.keyword Parabolic SAR
dc.subject.keyword RSI
dc.subject.keyword Force Index
dc.subject.keyword Average True Range
dc.identifier.urn URN:NBN:fi:aalto-201511054889
dc.type.dcmitype text en
dc.programme.major Economics en
dc.programme.major Kansantaloustiede fi
dc.type.ontasot Master's thesis en
dc.type.ontasot Pro gradu tutkielma fi
dc.subject.helecon taloustieteet
dc.subject.helecon economic science
dc.subject.helecon osakemarkkinat
dc.subject.helecon stock markets
dc.subject.helecon tuotto
dc.subject.helecon rate of return
dc.ethesisid 13992 2015-03-19
dc.location P1 I

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